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Item 7. Management’s Discussion and Analysis

2022-02-28 compared with 2021-02-23 · 166 added, 174 removed, 359 unchanged (49% of the section changed)

2 unchanged sentences

We are a diversified manufacturer of highly engineered industrial products.

Our business consists of four segments:

Fluid Handling, Payment & Merchandising Technologies, Aerospace & Electronics and Engineered Materials.

Our operations are comprised of four segments:

Aerospace & Electronics, Process Flow Technologies, Payment & Merchandising Technologies, and Engineered Materials.

Our primary end markets include process industries (chemical production, oil & gas, power, and general industrial), non-residential and municipal construction, payment automation solutions, banknote design and production, aerospace, defense and space, along with a wide range of general industrial and certain consumer related end markets.

9 unchanged sentences

Due to rounding, numbers presented throughout this report may not add up precisely to totals we provide and percentages may not precisely reflect the absolute figures.

Recent Transactions

On May 16, 2021, we entered into an agreement to sell the Engineered Materials segment to Grupo Verzatec S.A.

for $ 360 million on a cash-free and debt-free basis.

The sale is subject to customary closing conditions and regulatory approvals.

We determined that the Engineered Materials segment met the criteria of being reported as a discontinued operation as of June 30, 2021.

As a result, the related assets, liabilities and operating results of Engineered Materials are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all periods presented.

Throughout this Annual Report on Form 10-K, unless otherwise indicated, amounts and activity are presented on a continuing operations basis.

See Item 8 under Note 3, “Discontinued Operations,” in the Notes to Consolidated Financial Statements for additional details.

This section of this Form 10-K generally discusses 2021 and 2020 items and year-to-year comparisons between 2020 and 2019.

Discussions of 2018 items and year-to-year comparisons between 2019 and 2018 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019.

Segment discussions of 2019 items and year-to-year comparisons between 2020 and 2019 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations — For the Years Ended December 31, 2020, 2019 and 2018

Results from Continuing Operations

For the year ended December 31, 2021 vs 2020

2 unchanged sentences

(in millions, except %) 2021 2020 2019 $ % $ %

Fluid Handling $ 1,005.8 $ 1,117.4 $ 1,101.8 $ (111.6) (10.0) % $ 15.6 1.4 %

Payment & Merchandising Technologies 1,104.8 1,158.3 1,257.0 (53.5) (4.6) % (98.7) (7.9) %

Aerospace & Electronics $ 638.3 $ 650.7 $ 798.8 $ (12.4) (1.9) % $ (148.1) (18.5) %

Engineered Materials 175.6 208.6 243.2 (33.0) (15.8) % (34.6) (14.2) %

Process Flow Technologies 1,196.6 1,005.8 1,117.4 190.8 19.0 % (111.6) (10.0) %

Payment & Merchandising Technologies 1,345.1 1,104.8 1,158.3 240.3 21.8 % (53.5) (4.6) %

Total net sales $ 3,180.0 $ 2,761.3 $ 3,074.5 $ 418.7 15.2 % $ (313.2) (10.2) %

5 unchanged sentences

Operating profit (loss):

Fluid Handling $ 97.7 $ 131.7 $ 118.8 $ (34.0) (25.8) % $ 12.9 10.9 %

Payment & Merchandising Technologies 100.6 177.3 186.0 (76.7) (43.3) % (8.7) (4.7) %

Aerospace & Electronics $ 110.0 $ 100.7 $ 189.4 $ 9.3 9.2 % $ (88.7) (46.8) %

Engineered Materials 22.7 26.8 37.8 (4.1) (15.3) % (11.0) (29.1) %

Process Flow Technologies 182.5 97.7 131.7 84.8 86.8 % (34.0) (25.8) %

Payment & Merchandising Technologies 307.5 100.6 177.3 206.9 205.7 % (76.7) (43.3) %

Corporate expense (97.7) (58.8) (67.4) (38.9) (66.2) % 8.6 12.8 %

Corporate - Asbestos provision, net — (229.0) — 229.0 NM (229.0) NM

Corporate - Environmental provision, net — (18.9) — 18.9 NM (18.9) NM

Corporate - Asbestos provision, net — — (229.0) — — 229.0 NM

Corporate - Environmental provision, net — — (18.9) — — 18.9 NM

Total operating profit $ 502.3 $ 240.2 $ 183.1 $ 262.1 109.1 % $ 57.1 31.2 %

Operating margin:

Fluid Handling 9.7 % 11.8 % 10.8 %

Payment & Merchandising Technologies 9.1 % 15.3 % 14.8 %

Aerospace & Electronics 17.2 % 15.5 % 23.7 %

Engineered Materials 12.9 % 12.9 % 15.5 %

Process Flow Technologies 15.2 % 9.7 % 11.8 %

Payment & Merchandising Technologies 22.9 % 9.1 % 15.3 %

Total operating margin 15.8 % 8.7 % 6.0 %

1 unchanged sentence

$ — $ 12.9 $ 5.2

Restructuring and related charges, net (a)

Restructuring and related (gains) charges, net (a)

$ (9.6) $ 36.8 $ 29.1

(a) Acquisition-related and integration charges and restructuring and related charges, net are included in operating profit and operating margin.

Transaction related expenses (a)

$ 8.2 $ — $ —

(a) Acquisition-related and integration charges, restructuring and related (gains) charges, net and transaction related expenses are included in operating profit and operating margin.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Items Affecting Comparability of Reported Results

The comparability of our results from operations for the years ended December 31, 2020 and 2019 is affected by the following significant items:

Restructuring and Related Charges, net

In 2020, we recorded total pre-tax restructuring and related charges, net of $37.4 million primarily in response to the adverse economic impact of COVID-19 and integration actions related to the Cummins-Allison acquisition.

In 2019, we recorded total pre-tax restructuring and related charges, net of $29.1 million;

$9.9 million was related to the repositioning actions initiated in December 2019 in our Fluid Handling segment, $5.9 million was related to the acquisition of Crane Currency, and $13.3 million was related to the 2017 repositioning actions.

We expect annualized pre-tax savings subsequent to initiating all actions for all programs to approximate $175 million.

Please refer to the individual segment discussion and analysis that follows, as well as Part II, Item 8 under Note 15, "Restructuring" in the Notes to Consolidated Financial Statements for further discussion.

The comparability of our results from continuing operations for the years ended December 31, 2021, 2020 and 2019 is affected by the following significant items:

Restructuring and Related (Gains) Charges, net

In 2021, we recorded total pre-tax restructuring and related gains of $9.6 million primarily related to a gain on the sale of real estate.

In 2020, we recorded total pre-tax restructuring and related charges of $36.8 million primarily in response to the adverse economic impact of COVID-19 and integration actions related to the Cummins-Allison acquisition.

In 2019, we recorded total pre-tax restructuring and related charges of $29.1 million;

$9.9 million was related to the repositioning actions initiated in December 2019 in our Process Flow Technologies segment, $5.9 million was related to the acquisition of Crane Currency, and $13.3 million was related to our 2017 repositioning actions.

We expect pre-tax savings subsequent to completing all actions for all programs to approximate $165 million.

Please refer to the individual segment discussion and analysis that follows, as well as Item 8 under Note 16, "Restructuring" in the Notes to Consolidated Financial Statements for further discussion.

Transaction Related Expenses

During 2021, we recorded pre-tax transaction related expenses of $8.2 million related to the divestiture of Engineered Materials and other professional fees.

Acquisition-Related and Integration Charges

During 2020 and 2019, we recorded pre-tax acquisition-related and integration charges of $12.9 million and $5.2 million, respectively.

Please refer to Part II, Item 8 under Note 2, "Acquisitions" in the Notes to Consolidated Financial Statements for further discussion.

Please refer to Item 8 under Note 2, "Acquisitions" in the Notes to Consolidated Financial Statements for further discussion.

Asbestos Provision, net

In 2019, we recorded a pre-tax provision, net of insurance recoveries of $229.0 million associated with updating our estimated asbestos liability through the generally accepted end point in 2059.

Please refer to Part II, Item 8 under Note 12, "Commitments and Contingencies" in the Notes to Consolidated Financial Statements for further discussion.

Please refer to Item 8 under Note 13, "Commitments and Contingencies" in the Notes to Consolidated Financial Statements for further discussion.

Environmental Provision, net

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Please refer to Note 13, "Commitments and Contingencies" in the Notes to Consolidated Financial Statements for further discussion.

2021 compared with 2020

Sales increased by $418.7 million, or 15.2%, to $3,180.0 million in 2021.

The year-over-year higher sales included:

• an increase in core sales of $343.1 million, or 12.4%;

• favorable foreign currency translation of $70.6 million, or 2.6%;

• an increase in sales related to acquisitions of $5.0 million, or 0.2%.

Operating profit increased by $262.1 million, or 109.1%, to $502.3 million in 2021.

The increase in operating profit reflected higher operating profit in each of our segments, partially offset by higher corporate costs.

Operating profit in 2021 included net restructuring and related gains of $9.6 million and transaction related expenses of $8.2 million.

Operating profit in 2020 included restructuring and related charges of $36.8 million and acquisition-related and integration charges of $12.9 million.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

2020 compared with 2019

Sales decreased by $313.2 million, or 10.2%, to $2,761.3 million in 2020.

Net sales related to operations outside the United States for the years ended December 31, 2020 and 2019 was 37% and 36% of total net sales, respectively.

The year-over-year lower sales included:

5 unchanged sentences

These increases were largely offset by lower operating profit in each of our segments.

Operating profit in 2020 included restructuring and related charges, net of $37.4 million and acquisition-related and integration charges of $12.9 million.

Operating profit in 2019 also included restructuring and related charges, net of $29.1 million and acquisition-related and integration charges of $5.2 million.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Operating profit in 2020 included restructuring and related charges of $36.8 million and acquisition-related and integration charges of $12.9 million.

Operating profit in 2019 also included restructuring and related charges of $29.1 million and acquisition-related and integration charges of $5.2 million.

Comprehensive income

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Comprehensive income before allocation to noncontrolling interests 462.2 197.9 97.4

Noncontrolling interests in comprehensive income (0.5) (0.1) (0.3)

Noncontrolling interests in comprehensive income (loss) 0.6 (0.5) (0.1)

Comprehensive income attributable to common shareholders $ 461.6 $ 198.4 $ 97.5

For the year ended December 31, 2021, comprehensive income before allocation to noncontrolling interests was $462.2 million compared to $197.9 million in 2020.

The $100.5 million increase was primarily driven by a $58.9 million favorable impact of foreign currency translation adjustments year-over-year including fluctuations in the British pound, Canadian dollar, euro and Japanese yen;

and $47.5 million of higher net income before allocation to noncontrolling interests.

These increases were partially offset by a $5.9 million decrease due to changes in pension and postretirement plan assets and benefit obligations.

The $264.3 million increase was primarily driven by $254.3 million of higher net income before allocation to noncontrolling interests and a $149.6 million increase primarily related to changes in pension discount rates, partially offset by a $139.6 million unfavorable impact of foreign currency translation adjustments, primarily related to the British pound and euro.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FLUID HANDLING

AEROSPACE & ELECTRONICS

(in millions, except %) For the year ended December 31, 2021 2020 2019

Net sales by product line:

Process Valves and Related Products $ 631.6 $ 685.1 $ 685.4

Commercial Valves 286.3 332.1 325.4

Pumps and Systems 87.9 100.2 91.0

Commercial Original Equipment $ 229.4 $ 226.4 $ 357.2

Military Original Equipment 239.7 258.7 217.2

Commercial Aftermarket 104.5 93.0 161.4

Military Aftermarket 64.7 72.6 63.0

Total net sales $ 638.3 $ 650.7 $ 798.8

Operating profit $ 110.0 $ 100.7 $ 189.4

Acquisition-related and integration charges (a)

$ 6.3 $ 0.6 $ —

Restructuring and related charges, net (a)

3 unchanged sentences

Operating margin 17.2 % 15.5 % 23.7 %

(a) Acquisition-related and integration charges and restructuring and related charges, net are included in operating profit and operating margin.

Fluid Handling sales decreased by $111.6 million, or 10.0%, to $1,005.8 million, driven by lower core sales of $165.6 million, or 14.9%, partially offset by a benefit from the acquisition of I&S of $53.2 million, or 4.8%, and favorable foreign currency translation of $0.8 million, or 0.1%.

• Sales of Process Valves and Related Products decreased by $53.5 million, or 7.8%, to $631.6 million in 2020.

The decrease reflected lower core sales of $108.5 million, or 15.9%, partially offset by a benefit from the acquisition of I&S of $53.2 million, or 7.8%, and favorable foreign currency translation of $1.8 million, or 0.3%, as the euro strengthened against the U.S.

The core sales decline reflected a broad-based decline in demand related largely to impacts from COVID-19.

• Sales of Commercial Valves decreased by $45.8 million, or 13.8%, to $286.3 million in 2020, primarily driven by a core sales decline of $44.9 million, or 13.5%, and unfavorable foreign currency translation of $0.9 million, or 0.3%, as the Canadian dollar weakened against the U.S.

The core sales decline reflected a broad-based decline in demand related to COVID-19 across all geographies.

• Sales of Pumps and Systems decreased by $12.3 million, or 12.3%, to $87.9 million in 2020.

The decrease primarily reflected lower sales to military, industrial, and non-residential construction markets, partially offset by a slight increase in municipal sales.

Fluid Handling operating profit decreased by $34.0 million, or 25.8%, to $97.7 million in 2020.

The decrease primarily reflected the impact from lower sales volume, partially offset by productivity, COVID-19 related cost reduction actions and repositioning savings.

(a) Restructuring and related charges, net are included in operating profit and operating margin.

Aerospace & Electronics sales decreased $12.4 million, or 1.9%, to $638.3 million in 2021.

The commercial market and military market accounted for 52% and 48%, respectively, of total segment sales in 2021.

Sales to OEM and aftermarket customers in 2021 were 74% and 26% of total sales, respectively.

• Sales of Commercial Original Equipment increased by $3.0 million, or 1.3%, to $229.4 million in 2021.

• Sales of Military Original Equipment decreased by $19.0 million, or 7.3%, to $239.7 million in 2021, primarily reflecting challenging comparisons to particularly strong sales growth during the prior three years.

• Sales of Commercial Aftermarket increased by $11.5 million, or 12.4%, to $104.5 million in 2021, primarily reflecting higher demand driven by a rebound in commercial air traffic following the 2020 impact of COVID-19.

• Sales of Military Aftermarket decreased by $7.9 million, or 10.9%, to $64.7 million in 2021, primarily reflecting particularly strong sales in the prior year.

Aerospace & Electronics operating profit increased by $9.3 million, or 9.2%, to $110.0 million in 2021, primarily as a result of savings from 2020 repositioning actions of $19.0 million and productivity benefits of $16.5 million, largely offset by the impact of lower sales volumes of $21.3 million and $4.9 million of other items, net.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

PAYMENT & MERCHANDISING TECHNOLOGIES

Process Flow Technologies

(in millions, except %) For the year ended December 31, 2021 2020 2019

Net sales by product line:

Payment Acceptance and Dispensing Products (a)

$ 670.8 $ 805.5 $ 798.8

Banknotes and Security Products 434.0 352.8 458.2

Process Valves and Related Products $ 717.1 $ 631.6 $ 685.1

Commercial Valves 374.2 286.3 332.1

Pumps and Systems 105.3 87.9 100.2

Total net sales $ 1,196.6 $ 1,005.8 $ 1,117.4

Operating profit $ 182.5 $ 97.7 $ 131.7

Acquisition-related and integration charges (b)

Acquisition-related and integration charges (a)

$ — $ 6.3 $ 0.6

Restructuring and related charges, net (b)

Restructuring and related (gains) charges, net (a)

$ (5.9) $ 10.5 $ 19.2

2 unchanged sentences

Operating margin 15.2 % 9.7 % 11.8 %

(a) As a result of an internal merger of the CMS business into the vending vertical of the CPI business, Payment Acceptance and Dispensing Products now includes Merchandising Equipment.

Prior periods have been reclassified to conform to the current year presentation.

(b) Acquisition-related and integration charges and restructuring and related charges, net are included in operating profit and operating margin.

Payment & Merchandising Technologies sales decreased $53.5 million, or 4.6%, to $1,104.8 million in 2020, reflecting lower core sales of $218.3 million, or 18.9%, partially offset by a benefit from the acquisition of Cummins-Allison of $158.6 million, or 13.7%, and favorable foreign currency translation of $6.2 million, or 0.5%.

• Sales of Payment Acceptance and Dispensing Products decreased $134.7 million, or 16.7%, to $670.8 million in 2020.

The decrease reflected lower core sales of $295.1 million, or 36.6%, partially offset by a benefit from the acquisition of Cummins-Allison of $158.6 million, or 19.7%, and favorable foreign currency translation of $1.8 million, or 0.2%, as the Japanese yen strengthened against the U.S.

The core sales decrease reflected lower sales to all vertical markets driven primarily by COVID-19 related demand impacts.

• Sales of Banknotes and Security Products increased $81.2 million, or 23.0%, to $434.0 million in 2020.

The increase reflected higher core sales of $76.8 million, or 21.8%, and favorable foreign currency translation of $4.4 million, or 1.3%, as the euro strengthened against the U.S.

The core sales increase reflected higher sales to both international customers and the U.S.

Payment & Merchandising Technologies operating profit decreased by $76.7 million, or 43.3%, to $100.6 million in 2020.

The decrease was driven primarily by the impact from lower sales volume, partially offset by productivity.

(a) Acquisition-related and integration charges and restructuring and related (gains) charges, net are included in operating profit and operating margin.

Process Flow Technologies sales increased by $190.8 million, or 19.0%, to $1,196.6 million in 2021, driven by higher core sales of $145.2 million, or 14.5%, favorable foreign currency translation of $40.6 million, or 4.0% and a benefit from the January 2020 acquisition of Instrumentation & Sampling (“I&S”) of $5.0 million, or 0.5%.

• Sales of Process Valves and Related Products increased by $85.5 million, or 13.5%, to $717.1 million in 2021.

The increase reflected higher core sales of $66.2 million, or 10.4%, favorable foreign currency translation of $14.3 million, or 2.3%, primarily reflecting the strengthening of the euro against the U.S.

dollar, and a benefit from the acquisition of I&S of $5.0 million, or 0.8%.

The higher core sales primarily reflected broad based strengthening across chemical, pharmaceutical, and general industrial end markets that continue to recover from the 2020 impact of COVID-19.

• Sales of Commercial Valves increased by $87.9 million, or 30.7%, to $374.2 million in 2021 primarily driven by a core sales increase of $62.3 million, or 21.8%, and favorable foreign currency translation of $25.6 million, or 8.9%, as the Canadian dollar and British pound strengthened against the U.S.

The higher core sales reflected higher demand in Canadian non-residential construction markets, and to a lesser extent, higher demand in UK non-residential construction markets.

• Sales of Pumps and Systems increased by $17.4 million, or 19.8%, to $105.3 million in 2021, primarily reflecting higher demand from municipal and non-residential construction end markets.

Process Flow Technologies operating profit increased by $84.8 million, or 86.8%, to $182.5 million in 2021.

The increase primarily reflected the impact of higher sales volumes of $45.2 million, productivity benefits of $24.7 million, the absence of acquisition-related and integration charges of $6.3 million, lower restructuring costs of $16.4 million which included a gain on the sale of real estate related to prior repositioning actions, partially offset by $7.8 million of other items, net.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

AEROSPACE & ELECTRONICS

PAYMENT & MERCHANDISING TECHNOLOGIES

(in millions, except %) For the year ended December 31, 2021 2020 2019

Net sales by product line:

Commercial Original Equipment $ 226.4 $ 357.2 $ 343.4

Military Original Equipment 258.7 217.2 195.7

Commercial Aftermarket 93.0 161.4 150.5

Military Aftermarket 72.6 63.0 53.9

Payment Acceptance and Dispensing Products $ 805.7 $ 670.8 $ 805.5

Banknotes and Security Products 539.4 434.0 352.8

Total net sales $ 1,345.1 $ 1,104.8 $ 1,158.3

Operating profit $ 307.5 $ 100.6 $ 177.3

Restructuring and related charges, net (a)

Acquisition-related and integration charges (a)

$ — $ 6.5 $ 2.4

Assets $ 593.9 $ 638.1 $ 603.9

Backlog $ 491.2 $ 567.4 $ 446.6

Operating margin 15.5 % 23.7 % 22.1 %

(a) Restructuring and related charges, net are included in operating profit and operating margin.

Aerospace & Electronics sales decreased $148.1 million, or 18.5%, to $650.7 million in 2020.

The commercial market and military market accounted for 49% and 51%, respectively, of total segment sales in 2020.

Sales to OEM and aftermarket customers in 2020 were 75% and 25% of total sales, respectively.

• Sales of Commercial Original Equipment decreased by $130.8 million, or 36.6%, to $226.4 million in 2020, primarily reflecting lower aircraft build rates as a result of COVID-19, and to a lesser extent, the impact of Boeing’s 737 MAX production pause.

• Sales of Military Original Equipment increased by $41.5 million, or 19.1%, to $258.7 million in 2020, primarily reflecting broad-based military demand strength across solutions.

• Sales of Commercial Aftermarket decreased by $68.4 million, or 42.4%, to $93.0 million in 2020, primarily reflecting lower sales of commercial spares, and to a lesser extent, lower repair and overhaul sales, as airlines reduced flight schedules in response to COVID-19.

• Sales of Military Aftermarket increased by $9.6 million, or 15.2%, to $72.6 million in 2020, primarily reflecting broad-based military demand strength across solutions.

Aerospace & Electronics operating profit decreased by $88.7 million, or 46.8%, to $100.7 million in 2020, primarily reflecting the impact from lower sales volume, partially offset by productivity, COVID-19 related cost reduction actions and repositioning savings.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ENGINEERED MATERIALS

(in millions, except %) For the year ended December 31, 2020 2019 2018

Net sales by product line:

FRP- Recreational Vehicles $ 68.9 $ 84.5 $ 119.0

FRP- Building Products 83.1 91.9 92.2

FRP- Transportation 23.6 32.2 32.0

Total net sales $ 175.6 $ 208.6 $ 243.2

Operating profit $ 22.7 $ 26.8 $ 37.8

Restructuring and related charges (a)

Restructuring and related (gains) charges, net (a)

$ (3.7) $ 19.8 $ 7.6

2 unchanged sentences

Operating margin 22.9 % 9.1 % 15.3 %

(a) Restructuring and related charges are included in operating profit and operating margin.

Engineered Materials sales decreased by $33.0 million, or 15.8%, to $175.6 million in 2020.

• Sales of FRP panels to RV manufacturers decreased by $15.6 million, or 18.5%, to $68.9 million in 2020, reflecting lower RV industry production rates.

• Sales of FRP to building products customers decreased $8.8 million, or 9.6%, to $83.1 million in 2020, reflecting lower demand from customers, particularly restaurants, due to the impact of COVID-19.

• Sales of FRP to transportation customers decreased $8.6 million, or 26.7%, to $23.6 million in 2020, primarily reflecting lower trailer industry production rates.

Engineered Materials operating profit decreased by $4.1 million, or 15.3%, to $22.7 million in 2020, primarily reflecting the impact from the lower sales volume, partially offset by productivity.

(a) Acquisition-related and integration charges and restructuring and related (gains) charges, net are included in operating profit and operating margin.

Payment & Merchandising Technologies sales increased $240.3 million, or 21.8%, to $1,345.1 million in 2021, reflecting higher core sales of $210.6 million, or 19.1%, and favorable foreign currency translation of $29.7 million, or 2.7%.

• Sales of Payment Acceptance and Dispensing Products increased $134.9 million, or 20.1%, to $805.7 million in 2021.

The increase reflected higher core sales of $123.3 million, or 18.4%, and favorable foreign currency translation of $11.6 million, or 1.7%, primarily reflecting the strengthening of the British pound against the U.S.

The core sales increase primarily reflected higher sales to gaming, retail, vending and transportation customers as end markets continued to recover from the 2020 impact of COVID-19.

• Sales of Banknotes and Security Products increased $105.4 million, or 24.3%, to $539.4 million in 2021.

The increase reflected higher core sales of $87.3 million, or 20.1%, and favorable foreign currency translation of $18.1 million, or 4.2%, as the euro strengthened against the U.S.

The core sales increase reflected substantially higher sales of banknotes, globally.

Payment & Merchandising Technologies operating profit increased by $206.9 million, or 205.7%, to $307.5 million in 2021.

The increase primarily reflected the impact of higher sales volumes of $100.7 million and, to a lesser extent, favorable mix of $41.9 million, productivity benefits of $34.7 million, lower restructuring and related costs of $23.5 million and acquisition-related and integration charges of $6.5 million which did not repeat in the current year, partially offset by $0.4 million of other items, net.

(in millions) For the year ended December 31, 2021 2020 2019

6 unchanged sentences

(a) Acquisition-related and integration charges are included in Corporate expense

Total Corporate expense was lower by $256.0 million in 2020 due to the absence of a pre-tax asbestos provision, net of insurance recoveries of $229.0 million and a pre-tax environmental provision, net of reimbursements of $18.9 million.

See Note 12, "Commitments and Contingencies" in the Notes to Consolidated Financial Statements for further discussion related to the asbestos and environmental provisions.

Total Corporate expense increased by $38.9 million, or 66.2%, in 2021 primarily related to higher compensation and benefit costs of $19.0 million and transaction related expenses of $8.2 million.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTEREST AND MISCELLANEOUS INCOME, NET

3 unchanged sentences

Miscellaneous income, net $ 20.5 $ 14.9 $ 4.9

Interest expense increased $8.5 million, or 18.2%, primarily related to additional debt associated with the 364-Day Credit Agreement.

Miscellaneous income, net increased $10.5 million, or 238.6%, primarily reflecting a higher net periodic pension benefit resulting from non-service pension cost adjustments related to a decrease in interest costs.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Interest expense decreased $8.4 million, or 15.2%, resulting from the absence of interest paid for the 364-day credit facility that was paid in April 2021 and lower amounts outstanding under the commercial paper facility beginning in the second quarter of 2021 .

Miscellaneous income, net, increased $5.6 million, or 37.6%, primarily reflecting a gain on sale of a property.

(in millions, except %) For the year ended December 31, 2021 2020 2019

9 unchanged sentences

A reconciliation of the statutory U.S.

federal tax rate to our effective tax rate is set forth in Part II, Item 8 under Note 9, "Income Taxes" in the Notes to Consolidated Financial Statements.

federal tax rate to our effective tax rate is set forth in Item 8 under Note 10, "Income Taxes" in the Notes to Consolidated Financial Statements.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

1 unchanged sentence

(in millions) For the year ended December 31, 2021 2020 2019

Net cash provided by (used in):

Operating activities $ 309.5 $ 393.9 $ 413.8

Investing activities (229.1) (221.0) (752.3)

Financing activities 55.1 (124.6) (7.9)

Net cash (used for) provided by:

Operating activities from continuing operations $ 466.7 $ 284.1 $ 370.4

Investing activities from continuing operations 1.9 (228.0) (216.6)

Financing activities from continuing operations (557.9) 55.1 (124.6)

Discontinued operations 29.6 24.3 19.0

Effect of exchange rates on cash and cash equivalents (12.7) 21.6 2.3

Increase (decrease) in cash and cash equivalents $ 157.1 $ 50.5 $ (362.8)

(Decrease) increase in cash and cash equivalents $ (72.4) $ 157.1 $ 50.5

Our operating philosophy is to deploy cash provided from operating activities, when appropriate, to provide value to shareholders by reinvesting in existing businesses, by making acquisitions that will strengthen and complement our portfolio, by divesting businesses that are no longer strategic or aligned with our portfolio and where such divestitures can generate capacity for strategic investments and initiatives that further optimize our portfolio, and by paying dividends and/or repurchasing shares.

At any given time, and from time to time, we may be evaluating one or more of these opportunities, although we cannot assure you if or when we will consummate any such transaction.

Our current cash balance, together with cash we expect to generate from future operations along with our commercial paper program or borrowings available under our revolving credit facility is expected to be sufficient to finance our short- and long-term capital requirements, as well as to fund payments associated with our asbestos and environmental liabilities and expected pension contributions.

In addition, we believe our investment grade credit ratings afford us adequate access to public and private debt markets.

At the end of 2020, we had more than $1.1 billion in available liquidity.

On April 16, 2020, to enhance financial flexibility and maintain maximum liquidity in response to the uncertainty in the global markets resulting from the COVID-19 pandemic, we entered into a senior unsecured 364-day credit facility (the “364-Day Credit Agreement”).

We borrowed term loans denominated in dollars in an aggregate principal amount equal to $300 million, and term loans denominated in euros in an aggregate principal amount equal to €40 million under the 364-Day Credit Agreement.

When our term loan matures in April 2021, we expect to repay it with cash on hand and issuance of commercial paper.

In July 2021, we entered into a $650 million, 5-year Revolving Credit Agreement, which replaced the existing $550 million revolving credit facility.

We also increased the size of our Commercial Paper Program (“CP Program”) to permit the issuance of short-term, unsecured commercial paper notes in an aggregate principal amount outstanding not to exceed $650 million at any time (up from $550 million, previously).

See Item 8 under Note 14, “Financing,” in the Notes to Consolidated Financial Statements for details regarding our financing arrangements.

On April 15, 2021, we repaid the amount outstanding under the 364-Day Credit Agreement which we entered into to enhance financial flexibility and maintain maximum liquidity in response to the uncertainty in the global markets resulting from the COVID-19 pandemic.

Operating Activities

Cash provided by operating activities, a key source of our liquidity, was $309.5 million in 2020, compared to $393.9 million in 2019.

The decrease in cash provided by operating activities was primarily driven by lower operating results, partially offset by lower working capital levels.

Cash provided by operating activities from continuing operations, a key source of our liquidity, was $466.7 million in 2021, compared to $284.1 million in 2020.

The increase in cash provided by operating activities from continuing operations was primarily driven by higher net income, partially offset by higher asbestos-related payments.

Net asbestos-related payments in 2021 and 2020 were $44.9 million and $31.1 million, respectively.

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Investing Activities

Cash flows relating to investing activities consist primarily of cash used for acquisitions, capital expenditures and cash provided by divestitures of businesses or assets.

Cash used for investing activities was $229.1 million in 2020, compared to $221.0 million in 2019.

The increase in cash used for investing activities was driven by net cash used to purchase marketable securities of $30 million and higher cash paid for acquisitions, partially offset by lower capital expenditures resulting from deferring certain capital expenditures in response to the COVID-19 pandemic.

Cash flows relating to investing activities from continuing operations consist primarily of cash used for acquisitions, capital expenditures and cash provided by divestitures of businesses or assets.

Cash provided by investing activities from continuing operations was $1.9 million in 2021, compared to cash used for investing activities from continuing operations of $228.0 million in 2020.

Cash used for investing activities in 2020 was driven by the acquisition of I&S for $169.5 million.

There were no similar acquisitions in 2021.

In addition, there was $30 million of net proceeds from the sale of marketable securities in 2021 compared to $30 million of cash used for the purchase of marketable securities in 2020.

Capital expenditures are made primarily for increasing capacity, replacing equipment, supporting new product development and improving information systems.

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Financing cash flows consist primarily of dividend payments to shareholders, share repurchases, repayments of indebtedness, proceeds from the issuance of long-term debt and commercial paper and proceeds from the issuance of common stock.

Cash provided by financing activities was $55.1 million in 2020, compared to cash used for financing activities of $124.6 million in 2019.

The increase in cash provided by financing activities was driven by $343.9 million of borrowings under the 364-day credit facility, partially offset by $122.2 million o f net repayments of commercial paper in 2020 compared to $149.4 million of net proceeds of commercial paper in 2019 and the absence of $103.4 million repayment of the amount that was due under the syndicated loan facility and the building loan facility which we assumed as part of the Crane Currency acquisition.

Cash used for financing activities from continuing operations was $557.9 million in 2021, compared to cash provided by financing activities from continuing operations of $55.1 million in 2020.

The increase in cash used for financing activities from continuing operations was driven by the $348.1 million repayment of the outstanding amount under the 364-Day Credit Agreement in 2021, compared to proceeds of $343.9 million received from the same 364-Day Credit Agreement in 2020.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Financing Arrangements

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Our indebtedness as of December 31, 2021 was as follows:

• $27.2 million of commercial paper;

• $348.5 million under the 364-Day Credit Agreement;

• $299.4 million of 4.45% notes due 2023;

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

• $198.5 million of 6.55% notes due 2036;

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(in millions)

Short-term borrowings $ 375.7

Long-term debt 842.9

Total indebtedness $ 1,218.6

Total long-term debt $ 842.4

Total shareholders’ equity 1,832.3

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Total indebtedness to capitalization 31.5 %

See Part II, Item 8 under Note 13, “Financing,” in the Notes to Consolidated Financial Statements for details regarding our financing arrangements.

See Item 8 under Note 14, “Financing,” in the Notes to Consolidated Financial Statements for details regarding our financing arrangements.

Credit Ratings

As of December 31, 2020, our senior unsecured debt was rated BBB by S&P Global Ratings with a Negative outlook and Baa2 with a Stable outlook by Moody’s Investors Service.

As of December 31, 2021, our senior unsecured debt was rated BBB by S&P Global Ratings with a Stable outlook and Baa2 with a Stable outlook by Moody’s Investors Service.

We believe that these ratings afford us adequate access to the public and private debt markets.

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Total $ 2,361.3 $ 274.9 $ 550.4 $ 199.9 $ 1,336.1

(a) Debt includes commercial paper, borrowings under 364-Day Credit Agreement and scheduled principal payments.

(a) Debt includes scheduled principal payments.

(b) Pension benefits are funded by the respective pension trusts.

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Non-GAAP financial measures, which may be inconsistent with similarly captioned measures presented by other companies, should be viewed in the context of the definitions of the elements of such measures we provide and in addition to, and not as a substitute for, our reported results prepared and presented in accordance with U.S.

In 2020, equity increased $54.8 million as a result of net income before allocation to noncontrolling interests of $181.1 million, the impact of equity-based awards and related settlement activities of $27.3 million and currency translation adjustment of $70.4 million.

These increases were partially offset by cash dividends of $100.4 million, share repurchases of $70.0 million and changes in pension and post retirement plan assets and benefit obligations, net of tax of $53.6 million.

In 2021, equity increased $304.0 million as a result of net income before allocation to noncontrolling interests of $435.4 million, changes in pension and post retirement plan assets and benefit obligations, net of tax of $96.0 million and the impact of equity-based awards and related settlement activities of $39.0 million.

These increases were partially offset by cash dividends of $100.9 million, currency translation adjustment of $69.2 million and share repurchases of $96.3 million.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OUTLOOK - CONTINUING OPERATIONS

Our sales depend heavily on industries that are cyclical in nature or are subject to market conditions which may cause customer demand for our products to be volatile and unpredictable.

Demand in these industries is affected by fluctuations in domestic and international economic conditions, as well as currency fluctuations, commodity costs, and a variety of other factors.

For 2021, we expect a total year-over-year sales increase of approximately 4%, driven by low-single digit core growth, a 1% to 2% benefit from favorable foreign exchange, and a slight acquisition benefit.

We expect an improvement in operating profit of more than 50%, driven by a combination of restructuring and acquisition related charges recorded in 2020 that will not repeat in 2021, operating leverage on higher volumes, and productivity and repositioning savings.

Fluid Handling

In 2021, we expect Fluid Handling sales to increase in the low to mid-single digit range compared to 2020, driven by favorable foreign exchange of approximately 2%, a slight increase in core sales, and a small contribution from the I&S acquisition.

We expect Process Valves and Related Products sales to increase in the mid-single digit range compared to 2020, driven by low-single digit core sales growth, a small benefit from the I&S acquisition, and slightly favorable foreign exchange.

We expect Commercial Valves sales to be approximately flat compared to 2020, driven by a low to mid-single digit benefit from favorable foreign exchange largely offset by a decline in core sales.

We expect Pumps and Systems sales to increase in the low-single digit range compared to 2020, driven by growth in the military and U.S.

municipal markets.

We expect an improvement in the segment’s operating profit and operating margin compared to 2020, driven by strong productivity, lower restructuring and acquisition related charges, and repositioning savings.

Payment & Merchandising Technologies

In 2021, we expect Payment & Merchandising Technologies sales to increase in the high-single digit range compared to 2020, driven primarily by mid-single digit core sales growth, and a low-single digit benefit from favorable foreign exchange.

At Crane Payment Innovations, we expect core sales growth in the mid-single digit range, driven by broad-based strength across vertical markets.

At Crane Currency, we expect core sales to increase in the high-single digit range compared to 2020.

We expect the segment’s operating profit to increase substantially compared to 2020, driven by the impact from the higher sales volume, favorable product mix, productivity and repositioning savings, and lower restructuring and acquisition-related costs.

For 2022, we expect a total year-over-year sales increase of approximately 3% to 4%, driven by approximately 5% core growth, partially offset by a 1% to 2% impact from unfavorable foreign exchange.

We expect an improvement in operating profit driven primarily by productivity benefits and operating leverage on higher volumes, partially offset by unfavorable mix.

Aerospace & Electronics

In 2021, we expect Aerospace & Electronics core sales to decline in the high-single digit range compared to 2020.

We expect a decline in our commercial OEM business driven by lower aircraft build rates, and we expect a decline in our commercial aftermarket business given continued weakness in airline flight hours due to the impacts of COVID-19.

We expect a decline in our defense OEM and aftermarket businesses given very challenging comparisons to 2020 where these markets exhibited very strong growth.

We expect segment operating profit and operating margin to decrease compared to 2020 driven primarily by the impact of the lower sales volume, partially offset by improved productivity, repositioning savings, and lower restructuring and related costs.

Engineered Materials

In 2021, we expect the Engineered Materials segment sales to increase approximately 20% compared to 2020 driven primarily by substantially stronger recreational vehicle industry build rates, higher trailer industry build rates, a recovery in certain building products end markets, and share gain initiatives.

Segment operating profit and operating margin are expected to increase compared to 2020 driven primarily by the impact of the higher sales volume.

In 2022, we expect Aerospace & Electronics core sales to increase in the high-single digit range compared to 2021.

We expect a substantial improvement in our commercial OEM business driven by higher aircraft build rates, and we expect a substantial improvement in our commercial aftermarket business given continued recovery in airline flight hours following two years of depressed demand due to the impacts of COVID-19.

We expect our defense OEM to be flat and defense aftermarket businesses to be slightly lower given challenging comparisons to recent years where these markets exhibited very strong growth.

We expect segment operating profit and operating margin to increase compared to 2021 driven primarily by the impact of operating leverage on higher volumes.

Process Flow Technologies

In 2022, we expect Process Flow Technologies sales to increase approximately 1% driven by approximately 3% core growth, partially offset by a 2% impact from unfavorable foreign exchange.

We expect Process Valves and Related Products sales to increase in the low- to mid-single digit range compared to 2021, driven by mid-single digit core sales growth, partially offset by a low-single digit impact from unfavorable foreign exchange.

We expect Commercial Valves sales to decline in the mid-single digit range with a low-single digit decline in core sales and a low-single digit impact from unfavorable foreign exchange.

We expect Pumps and Systems sales to increase in the high-single digit range compared to 2021, driven by strong demand across municipal and non-residential U.S.

We expect an improvement in the segment’s operating profit and operating margin compared to 2021, driven by strong productivity and operating leverage on higher volumes.

Payment & Merchandising Technologies

In 2022, we expect Payment & Merchandising Technologies sales to increase in the low- to mid-single digit range compared to 2021, driven by mid-single digit core sales growth, partially offset by a low-single digit impact from unfavorable foreign exchange.

At Crane Payment Innovations, we expect core sales growth in the low-double digit range, driven by broad-based strength across all vertical markets.

At Crane Currency, we expect core sales to decline in the high-single digit range compared to 2021 due to lower expected sales to international customers.

We expect the segment’s operating profit to be similar compared to 2021, with higher prices and strong productivity approximately offset by inflationary pressures and unfavorable sales mix.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States.

Our significant accounting policies are more fully described in Part II, Item 8 under Note 1, “Nature of Operations and Significant Accounting Policies” in the Notes to Consolidated Financial Statements.

Our significant accounting policies are more fully described in Item 8 under Note 1, “Nature of Operations and Significant Accounting Policies” in the Notes to Consolidated Financial Statements.

Certain accounting policies require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period.

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As of December 31, 2021, we had $1,412.5 million of goodwill and $465.9 million of net intangible assets, of which $70.6 million were intangibles with indefinite useful lives, consisting of trade names.

During 2020, we observed a significant decline in the market valuation of our common shares as a result of the COVID-19 pandemic.

As such, we performed sensitivity analyses based on more recent assumptions, including entity-specific and macroeconomic factors resulting from the COVID-19 pandemic during the interim periods.

We concluded that it was not more likely than not that the fair values of the reporting units and indefinite-lived intangible assets were below their carrying values.

We also performed our annual impairment assessment (as described below) and concluded that no impairment charges have been required during 2020.

As of December 31, 2020, we had $1,437.7 million of goodwill and $519.1 million of net intangible assets, of which $70.9 million were intangibles with indefinite useful lives, consisting of trade names.

Our business acquisitions have typically resulted in the recognition of goodwill and other intangible assets.

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As of December 31, 2021, we had seven reporting units.

In the second quarter of 2021, the assets and liabilities of our Engineered Materials segment (which is a separate reportable segment and reporting unit) were classified as held for sale.

Please refer to Item 8 under 3, “Discontinued Operations” in the Notes to Consolidated Financial Statements for further discussion.

When performing our annual impairment assessment, we compare the fair value of each of our reporting units to our respective carrying value.

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We amortize the cost of definite-lived intangibles over their estimated useful lives.

In addition to annual testing for impairment of indefinite-lived intangible assets, we review all of our definite-lived intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Examples of events or changes in circumstances could include, but are not limited to, a prolonged economic downturn, current period operating or cash flow losses combined with a history of losses or a forecast of continuing losses associated with the use of an asset or asset group, or a current expectation that an asset or asset group will be sold or disposed of before the end of its previously estimated useful life.

associated with the use of an asset or asset group, or a current expectation that an asset or asset group will be sold or disposed of before the end of its previously estimated useful life.

Recoverability is based upon projections of anticipated future undiscounted cash flows associated with the use and eventual disposal of the definite-lived intangible asset (or asset group), as well as specific appraisal in certain instances.

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Management has made its best estimate of the costs through 2059.

Through December 31, 2020, our actual experience during the updated reference period for mesothelioma claims filed and dismissed generally approximated the assumptions in

Through December 31, 2021, our actual experience during the updated reference period for mesothelioma claims filed and dismissed generally approximated the assumptions in our liability estimate.

In addition to this claims experience, we considered additional quantitative and qualitative factors such as the nature of the aging of pending claims, significant appellate rulings and legislative developments, and their respective

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

our liability estimate.

effects on expected future settlement values.

Based on this evaluation, we determined that no change in the estimate was warranted for the period ended December 31, 2021.

The liability was $670 million as of December 31, 2020.

The liability was $612 million and $670 million as of December 31, 2021 and 2020, respectively.

In conjunction with developing the aggregate liability estimate referenced above, we also developed an estimate of probable insurance recoveries for our asbestos liabilities.

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The net periodic pension benefit was $6.8 million, $6.8 million and $0.6 million in 2021, 2020 and 2019, respectively.

The net periodic pension benefit was $6.2 million higher in 2020 compared to 2019, driven by lower interest costs for both U.S.

Employer cash contributions were $26.1 million, $4.2 million and $57.5 million (includes a $28 million discretionary contribution) in 2020, 2019 and 2018, respectively.

The net periodic pension benefit was the same in 2021 compared to 2020, driven by lower interest costs for both U.S.

plans offset by higher amortization of a net loss.

Employer cash contributions were $26.7 million, $26.1 million and $4.2 million in 2021, 2020 and 2019, respectively.

Holding all other factors constant, a decrease in the expected long-term rate of return on plan assets by 0.25 percentage points would have increased 2021 pension expense by $1.2 million for U.S.

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pension plans.

Also, holding all other factors constant, a decrease in the discount rate used to determine net periodic pension cost by 0.25 percentage points would have increased 2020 pension expense by $0.1 million for U.S.

pension plans and $0.7 million for non-U.S.

Also, holding all other factors constant, a decrease in the discount rate used to determine net periodic pension cost by 0.25 percentage points would have decreased 2021 pension expense by $0.2 million for U.S.

pension plans and increased 2021 pension expense by $0.8 million for non-U.S.

pension plans.

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Recent Accounting Pronouncements

Information regarding new accounting pronouncements is included in Part II, Item 8 under Note 1 to the Consolidated Financial Statements.

Information regarding new accounting pronouncements is included in Item 8 under Note 1 to the Consolidated Financial Statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis